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Congressional Republicans are proposing to permanently allow wealthy families to pass on more of their assets tax-free, as the federal government all but abandons taxing large inheritances.
Under current law, estates pay tax only on transfers above $13.99 million for single filers and $27.98 million for married couples. Those thresholds, doubled by President Donald Trump's 2017 tax law, are scheduled to fall by roughly half at the end of 2025. But in the tax bill before Congress, both the House and Senate versions would raise the exemption starting next year to $15 million for individuals and $30 million for couples, then set them to adjust for inflation in the future.
Though they represent a small part of the overall costs of Trump's tax bill, these changes are set to weaken an estate tax that already affects fewer households than it has in decades. When the federal estate tax was first imposed in 1934, roughly 8,600 deaths resulted in estate tax liability, or 0.9 percent of adult deaths. In 2019, the most recent year for which IRS data is available, only 2,100 deaths resulted in estate tax liability, or 0.08 percent of deaths. The proposed increases are expected to reduce that share even more.
"The estate tax is barely hanging on right now," said Steve Wamhoff, federal policy director at the left-leaning Institute on Taxation and Economic Policy. "This bill would make sure it almost disappears."
The estate tax has proved divisive in Washington, as Republicans have for years sought its eradication. When someone dies, their assets become an estate. For 2025, only the portion of an estate above $13.99 million per person - a limit that also absorbs any large gifts made while someone is alive - is subject to the federal estate tax, and only the value over the exemption is taxed, at rates that top out at 40 percent. Twelve states and the District of Columbia impose their own estate or inheritance taxes with lower thresholds and a variety of rates.
While the tax's defenders say it is necessary to curb dynastic wealth at a time of rising inequality, conservatives have long argued the policy unfairly hits the same taxpayer twice because it taxes assets that were originally accumulated after their owners paid income taxes. Levies on consumption, many economists say, are more effective and efficient ways to make the tax code fairer.
The provision raising the limit is not considered controversial among Republicans and is expected to pass without dissent among the GOP ranks in either the House or Senate. Senate Majority Leader John Thune (R-South Dakota), who has sponsored Senate legislation to outright repeal what Republicans call "the death tax," has said doing so is necessary to prevent cash-poor firms, including family farms, from selling off equipment or land to pay the tax.
The estate tax changes in the current GOP tax bill will cost the federal government roughly $210 billion over the next 10 years, according to the nonpartisan Joint Committee on Taxation.
"It's a tax on savings, and there's a double-taxation issue - you earn the money, you paid taxes, and then the government comes after you again when you die," said Michael Strain, an economist at the American Enterprise Institute, a center-right think tank. Strain said that the levy "creates weird perversities: Two people who know they're going to die - one buys cocaine and goes to Vegas and gambles and pays no tax, the other gives money to kids and pays the tax."
Several decades of GOP influence on federal policymaking have whittled down the estate tax. Before President George W. Bush's 2001 tax cuts, about 2 percent of estates paid the levy, far more than do now. Even those estates who do owe the tax often reduce or eliminate their liability, said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, through trusts, valuation discounts and life-insurance strategies.
Republicans under Bush sought to eliminate the estate tax, but because of Senate rules settled for merely shrinking it - a strategy the party has replicated under Trump.
"Having an estate tax that affects so few heirs allows this massive intergenerational transfer of wealth that keeps the rich richer and gives them the opportunity to get even richer," Gleckman said.
The effects of the weaker estate tax on inequality are hard to measure. But federal data suggests that inequality has broadly continued to rise: The average wealth of a family in the top 10 percent soared from roughly $3 million in 1989 to more than $9 million in 2022, according to the latest nonpartisan Congressional Budget Office report. Over the same period of time, those in the bottom 10 percent found their average wealth rising from $27,000 to $74,000, the report found.
"The estate tax is one of the few federal policies that can slow down the growing wealth gap and this enormous growth in inequality," said Wamhoff, of the Institute of Taxation and Economic Policy. "We're basically not taxing generational wealth at all right now."